What Is Dropshipping?
Dropshipping is a method of order fulfilment in which a store doesn’t keep the products they sell in stock. The seller doesn’t handle the product directly; instead, the store purchases the item from a third-party supplier that ships it to the customer.
Procurement occurs at the time the customer places an order. The tea retailer registers the order with their supplier, and the shipping cycle begins. Dropshipping business models eliminate fulfillments’ substantial complexity.
How Dropshipping Works
What differentiates dropshipping from a traditional tea retailer is that it shortens the tea supply chain. Online tea businesses can purchase from wholesale websites rather than traveling to tea-producing countries (e.g., China, Kenya, India, Japan, Sri Lanka).
Many tea businesses find constructing the supply chain complex or expensive, and sometimes both. Some tea supply chains involve purchasing from farms and factories, most of which have a minimum order quality (MOQ).
Other tea businesses may purchase from tea blenders (e.g., those in Dubai or Germany), which may place requirements on the retailer (e.g., contracts, MOQs). Such conditions can place heavy burdens on startups, making launching a tea company inaccessible to some entrepreneurs.
Is Dropshipping Tea Profitable?
Some dropshipping tea companies have emerged as profitable businesses.
A dropshipper’s profit is the difference between the supplier’s wholesale price and your retail price. Costs include the cost of goods sold (e.g., tea, freight), and operational costs, such as marketing (e.g., pay per click advertising), and website and software costs (e.g., Shopify).
Tea is a relatively lightweight item, making it cheaper to ship. These lower freight costs make tea an attractive item to many dropshippers. In particular, dropshipping tea bags is often an attractive option to dropshipping tea businesses looking to minimize freight costs. Such tea packaging is often made of light materials such as thin cardboard.
For tea, the profitability of the dropshipping business depends on product quality and positioning.
See how I can help your tea or coffee business sell more products.
- Strategy: Get a clear direction with insightful marketing and branding strategies.
- SEO: Get colossal amounts of SEO traffic. See actual results.
- Content Marketing: I create epic content that gets you traffic, shares, and links.
- Paid Media: effective paid advertising with clear ROI.
Tea is an established market, and customers often have specific expectations of quality and taste. If the product of a dropshippers supplier is inferior (e.g., a sandy, low-grade matcha), the customer may not reorder. This is significant as the customer lifetime value (CLV) of a recurring customer significantly impacts business profitability.
Product positioning influences the profitability of dropshipping tea. As such, several vendors choose to dropship detox tea, products with alleged weight loss and wellness benefits.
Vendors may offer detox teas because the consumer's desire for possible benefits (e.g., weight loss) may outweigh the perceived risk of purchases (e.g., wasted money). The customer’s desire for potential benefits may lead to greater customer acquisition, driving growth for detox tea dropshipping businesses. Similarly, customers pursuing such wellness benefits may be more likely to repurchase or buy up-sell or cross-sell offerings.
However, vendors selling detox tea must meet the requirements of regulating bodies (e.g., FDA) which set parameters for ingredients, labelling, and marketing claims. Such product requirements may also be more strict or varied for hot button products, such as cannabis, which is why vendors dropshipping CBD tea may face added constraints.
Is Dropshipping Tea A Good Business?
Dropshipping may be best for startups and casual sellers; such businesses are easy to launch but challenging to differentiate in the market. Many other dropshippers may be using the same supplier and selling similar products.
Today there are few barriers to entry for the tea business; new companies can source a range of teas. Dropshipping tea businesses affect the tea market by cutting prices and intensifying competitive rivalry.
The increasing competition puts pressure on tea companies growing a “real” business, such as small players in the tea industry importing tea directly from producing countries. Such tea businesses may have better quality products (e.g., fresh first flush Darjeeling vs. old first flush Darjeeling), which may seem expensive by comparison. Tea companies may need to lower prices or spend more on marketing, eroding margins to remain competitive.
Marketing and the customer experience are critical to long-term business viability. As it’s easier for tea companies to enter the market, marketing, and customer experience become means by which companies can differentiate themselves. Dropshipping allows small businesses to invest in marketing at the expense of controlling customer experience.
Dropshipping may come at the cost of customer experience in the following ways:
- Limited branding on tea products
- Damaged parcels or incorrect goods
- Long delivery times
- Difficult returns
- Poor customer support
As major platforms (e.g., Shopify, Oberlo, AliExpres) and wholesalers continue investing in dropshipping technology and infrastructure, fulfillment may improve. Innovative wholesalers catering to dropshippers reduce uncertainty and risk. Such innovators focus on providing additional value to retailers, such as:
- Private labelling
- Product demand insights
- Shortage alerts
Advantages Of Dropshipping Tea
Dropshipping tea allows vendors to offer a wide range of products and test new product offerings with little risk. Sellers can try new tea products with minimal investment in inventory when dropshipping. It also allows vendors to handle unanticipated shifts in demand quickly.
Dropshipping requires low upfront capital, which reduces costs for new entrants to the tea market.
Sellers can expand sales by dropshipping private label tea. In private labelling, tea is supplied by a third party and sold under a tea retailer’s brand name. Private labelling gives retailers greater control than conventional dropshipping, and the retailers specify key product details (e.g., packaging, tea label).
The tea vendor pays for the private label products to be delivered to them, held at the third parties facility, and then delivered to customers. Private labelling preserves the vendor’s flexibility as a vendor’s product offering can consist of tea from different third-party suppliers.
Dropshipping allows tea vendors to generate revenue sooner. Sales can occur when a product page is published. This eliminates the merchant's waiting time, which occurs in more conventional tea businesses. For example, a tea retailer orders tea from China, and only when the tea is in the retailer’s warehouse can the retailer sell the products.
Dropshipping also reduces the risks and costs tea businesses face by owning and holding inventory.
Dropshipping tea offers retailers an inventory-free option, allowing them to launch a tea brand with minimal investment. It does not require much working capital, negates the need for an upfront investment, and eliminates the risk of out-of-stock or unsold goods.
Owning inventory exposes tea companies to risks such as:
- Value loss (e.g., a first flush tea becomes less valuable the older it is)
- Spoilage (e.g., moisture degrading product quality)
- Excess inventory
- Supply shortfall
Dropshipping tea effectively outsources the risks associated with inventory ownership to the suppliers. They must ensure the quality and quantity of their products; you avoid needing to store or manage inventory. You don’t need to concern yourself with controlling the temperature and humidity of tea storage or sell-by-dates.
Your tea supplier maintains the products, then when you forward your customer’s order, they pull, pack and ship the order directly to your final customers.
Customers purchasing from a dropshipping tea business believe the tea comes directly from the vendor, not a third-party supplier. Therefore, customers associate their customer experience and product quality with you.
Dropshipping is an attractive business model because it allows entrepreneurs to focus on marketing.
Low Capital Investment
A dropshipping retailer incurs product and fulfillment costs only when the customer pays. This means dropshipping tea businesses don’t need to tie up working capital, which reverses the standard wholesale procedure. Typically, retailers purchase a quantity of tea from a wholesaler and recover costs and earn profits when customers buy the tea.
Easy Market Entry
It’s easy for vendors to set up a dropshipping tea store and sell.
Disadvantages Of Dropshipping Tea
When dropshipping tea, the retailer is responsible for the customer’s journey. Specifically, the retailer is responsible for:
- Customer satisfaction
Retailers can incur slightly higher costs as a result of this responsibility. A customer may place an order on the website of a tea dropshipper for three products, which different suppliers may then supply. The retailer incurs three separate shipping charges.
The dropshipping tea vendor is also responsible for customer complaints. If the retailer’s supplier makes an error (e.g., missing item, incorrect item sent), the retailer must address the customer’s issue.
How Do You Start A Dropshipping Tea Business?
Launching a tea dropshipping business consists of three steps:
- Choosing a platform for your business.
- Finding and selecting suppliers.
- Marketing and promoting your tea.
1. Choosing A Platform
Amazon, Shopify, AliExpress, and eBay offer dropshipping fulfilment services. This discussion focuses on Shopify and Amazon.
Many vendors use Shopify; dropshipping tea from this platform allows for the semblance of a brand. Businesses owners can develop a website which:
- Provides social proof (e.g., reviews),
- Seems credible (e.g., has an About page, Instagram feed on the website),
- Builds a brand (e.g., brand colors)
- Offers some customer support (e.g., chat features)
Shopify plans start at USD 29 per month, and themes can be acquired for 200, removing the need for business owners to code websites. Similarly, other platforms (e.g., Fivver) offer service providers who build Shopify dropshipping stores for a price.
Amazon receives over 62.3M organic monthly visitors and sells
over 30,000 tea products, as of June 2022. The distribution potential of Amazon is significant, and tea dropshippers can use Amazon’s strong fulfillment capabilities with Fulfilled By Amazon (FBA).
2. Finding And Selecting Suppliers
Venders must first determine where to buy tea for dropshipping. Fortunately, several platforms provide dropshipping suppliers for tea.
Five common include:
- Empire Tea
- Mark T. Wendell
3. Marketing And Promoting Your Tea
Dropshippers often invest heavily in marketing. For tea dropshippers, this investment in marketing usually involves:
- Pay per click advertising (PPC)
- Facebook campaigns
- Social media marketing
- Influencer marketing
Social proof is crucial for dropshipping tea businesses wishing to promote their products. Reviews, before and after photos, and other forms of user generated content can significantly influence potential customers to purchase from your brand.
Get Yourself Featured
If you're an entrepreneur with experience dropshipping tea, I invite you to share a quote and get featured.